Latin America Offers Sound Diagnosis For E-Health Investors

Startups that help Latin America’s aging and impoverished population connect with health specialists or manage their doctor’s appointments are attracting the attention of venture capitalists, insurers, hospitals and health providers.

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Brazilian e-health providers have already attracted VC firms and may soon start receiving investments from insurers and strategic players. In Mexico, most dealmaking in the sector will be driven by mid-sized players, while in Colombia the industry is just starting to take off.

Three-quarters of Brazilians, or about 155 million people, still depend on the country’s public health system, said Rodrigo Esteves, managing partner at local investment firm Confrapar. Some are starting to seek private care, which creates market opportunities for technology platforms that connect patients with physicians or health centers, he added.

Bottlenecks in the handling of public and private health institutions’ processes, patients and even waste have also increased the demand for e-health solutions and attracted VC investors, said Eduardo Grytz, partner at Sao Paulo-based VC firm Performa Investimentos.

Confrapar, for instance, owns minority stakes in Help Saude, an online medical scheduling platform and ePrimerCare, a health management platform, said Esteves. Performa Investimentos owns minority stakes in Boa Consulta, a competitor of Help Saude, and ProRadis, which develops software for radiology clinics.

Esteves said strategic investors, such as insurance companies, are likely to seek e-health solutions that aim to reduce operating costs resulting from the aging of their insured patient population. Technologies that help patients maintain healthy habits, remind them to take medication, or help them track chronic diseases like diabetes should also attract interest from both financial and strategic investors, he added.

Bigger investment firms, however, are likely to start plowing capital into the industry in about two to five years for e-health firms to achieve greater scale, said Daniel Damiani, partner at MA advisory firm JK Capital.

In Mexico, technology will play an increasing role in the treatment of the country’s aging population, said Hector Valle, founding partner at health-focused VC firm Innovasalud. By 2050, Mexico’s over-80 population will increase to 6.3 million from 4.4 million. The firm, in partnership with local peer XB Ventures, plans to launch a new $ 10 million fund to invest in startups specialized in pain management, genetics, and telemedicine.

Mexico’s e-health industry has not only drawn interest from financial investors but also from strategic bidders, including foreign suitors. Campanas de Prevencion e Informacion Medica Previta (Previta), a Mexico City-based company whose technology helps detect chronic diseases including heart failure and diabetes, recently agreed to sell a stake to an undisclosed US insurance company as part of its capital raising efforts.

Similarly MediQo, a Mexico City-based company that connects patients with healthcare providers, is in talks to sell an undisclosed stake to an international insurance company, CEO Adrian Hijar told Mergermarket last month. Farmalisto, an online drug retailer that operates in Colombia and Mexico, is in talks to raise up to $ 5 million to fund possible acquisitions of technology-focused firms in other countries including Costa Rica and Ecuador.

As for Colombia — a country about the size of France and Spain combined (in terms land mass) — e-health technology has helped connect patients in remote locations with healthcare specialists, said Sergio Mejia, CEO of X-rol Telemedicina, a three-year-old startup that received state funding.

Half of Colombia’s population, or about 24 million people, still live in towns with less than 10,000 inhabitants. According to Mejia, platforms such as Medellin-based X-rol help local insurers and healthcare providers reduce the cost of having specialists treat patients suffering from high-cost diseases in remote areas, said Mejia.

However, in 2014 only 3.5 million patients in Colombia were cared for through e-health platforms, according to a study by the country’s Ministry of Information and Communications Technology. The study also found that only about half of the country’s healthcare providers have access to the internet and of those, only 48% have a cable or fiber-optic connection.

Colombia’s e-health sector is also stifled by the lack of interoperability between providers, said Mejia. An electronic medical record compiled by one company, for instance, cannot always be accessed by another provider, he added.

Consequently, he noted, the best chance for the sector to grow is for individual providers to expand their reach as most hospitals and clinics rely on third-party providers like X-rol to offer e-health services.

Bruna Maia covers business for Mergermarket from Sao Paulo. She can be reached at bruna.maia@acuris.com. Dominic Pasteiner and Carlos Martinez report for Mergermarket from Mexico City. They can be reached at dominic.pasteiner@acuris.com and carlos.martinez@acuris.com.